David Spiteri Gingell

The Malta Chamber and the General Workers Union present joint proposals for

Reforms to the pension system

In 2022, The Malta Chamber and the GWU teamed up to find common ground on pension reform recommendations to present to the political parties and the electorate. On 21st March, the two bodies, assisted by their consultant, Mr David Spiteri Gingell, presented two important reform recommendations.

BY DAVID SPITERI GINGELL – MEMBER OF THE MALTA CHAMBER PENSION COMMITTEE AND CONSULTANT

The first reform is directed towards removing barriers that exclude persons who opt for early retirement at 61 from remaining active in the labour market. Employers often have to import staff from overseas at high direct and indirect costs when this can be sourced from those who opted for early retirement. A key recommendation presented is that the existing ‘all or nothing approach’ to early retirement is replaced by a flexi-employment approach, which allows a person to balance their need to opt out of a 40 hour week whilst remaining active in the labour market. Governing conditions for such an approach include a pro-rated draw down of state pension whilst carrying flexi-employment. Additionally, the adoption of this recommendation ensures that the government’s pension and active ageing policies are aligned and, therefore, consistent with the EU’s objectives for active ageing. One further important recommendation is the need for the govern-

ment to re-design the tax structure for senior citizens who receive income from continued post-retirement employment and pension income. This should become an incentive rather than a detriment to continued active employment. The second recommendation is introducing a national workplace pension based on the principles of opt-in on employment with the the adoption of this choice of opt-out. The Chamber and the Union recommendation ensures that the government’s are concerned that the existing voluntary private and occupational pension and active ageing pension schemes as designed are not attracting policies are aligned and, young adults to invest in therefore, consistent these pension schemes: 2020 persons aged 19-29 with the EU’s objectives for active ageing. constituted only 10.5% and 8.3% of investors. Such voluntary opt-in on employment pensions schemes with the choice of an opt-out can be designed to create no social tensions or adverse impacts on both employers and employers. Some of the design principles proposed to achieve this are, for example, (a) employers being nudged to contribute on behalf of their employees based on a fiscal incentive (that is, no mandatory contribution) and through collective bargaining; (b) employees having the right to opt-out or suspend their contribution, and (c) the only obligation placed on the employer is that of carrying out retirement planning education and managing the administration aspects of the scheme such as enrolling an employee in the pension provider selected. The GWU and the Malta Chamber will be following up on these recommendations by formally presenting them to the government and stewarding a national debate on the importance of why these recommendations should be adopted. n